Finfluencers with AMFI registration may face SEBI scrutiny: Here's why
What's the story
The Securities and Exchange Board of India (SEBI) is considering reviewing financial influencers, or 'finfluencers,' registered as mutual fund distributors (MFDs) with the Association of Mutual Funds in India (AMFI).
This move comes as the regulator seeks to harmonize advertising codes across various regulated entities and address the spread of financial misinformation on social media platforms.
Regulatory scrutiny
SEBI's regulatory focus on financial influencers
SEBI chairperson Tuhin Kanta Pandey stressed the importance of uniform advertising codes for all SEBI-regulated entities.
"I have been talking to various associations. Several things can be done in terms of rationalization, removing redundancy, in case of combining things, and sometimes combining things across regulations," he said.
AMFI regulates MFDs. If it doesn't, Pandey assured SEBI's surveillance systems will step in.
Recently, SEBI announced its partnership with Meta and Google to remove 70,000 unregistered finfluencers.
Market concerns
Concerns over unregulated financial influencers
The former SEBI chairperson, Madhabi Puri Buch, had earlier said that since MFDs are agents of SEBI-regulated entities, mutual funds are responsible for their agents' actions.
Despite the large number of MFDs in India, there is a dearth of SEBI-registered investment advisors (RIAs).
Pandey admitted to this gap and urged more people to take up the profession.
He also stressed the need to educate people about the worth of paid advice versus free advice.
Impact assessment
High influence of finfluencers on investor behavior
A CFA Institute report found that 82% of social media-influenced investors acted on finfluencer advice, with 72% making profits.
However, only 2% of these influencers are registered with SEBI, raising concerns over misinformation and regulatory oversight.
Pankaj Sharma of the CFA Institute noted that some finfluencers deliberately evade regulation and those giving fraudulent advice can end up harming unsuspecting investors.